How Labour Reforms Are Changing the IT Sector

The IT sector is one of the major pillars of the economy of India. This sector is quite a vital contributor to the GDP of the country. Over the past few decades, India has risen as a global IT hub. It provides various IT services like business process outsourcing, software services and digital solutions to clients across the world. Its clients include some of the leading MNCs and governments. 

To establish a foundation for future ready workforce, the Government of India envisions to make compliance, promote flexibility and provide social security simpler and easier for all categories of workers like contract and gig employees via the new Labour Codes. 

These codes include four codes in total, i.e., The Code on Wages 2019, The Industrial Relations Code 2020, The Code on Social Security 2020 and The Occupational Safety, Health and Working Conditions Code 2020. 

They are especially significant for the IT sector as they offer clarity on wages, fixed term employment, work from home arrangements and workplace safety standards. In this blog post, we shall explain to our readers how the labour reforms are changing the IT sector.

Enhanced Ease of Doing Business in IT Sector Due to Labour Reforms: Key Provisions

The IT sector undoubtedly generates significant revenue for the country. In addition to this, it creates millions of direct and indirect jobs while contributing to skill development, technological advancement and innovation for the individuals. Given the scale and complexity of the IT workplace, labor regulations play a very important role when it comes to ensuring a balanced and productive work environment.

Here are the key provisions within the new codes that promise enhanced ease of doing business, especially when we talk about the IT sector. :-

Workforce Flexibility & Evolving Employment Models

Here is how the new codes are ensuring workforce flexibility and evolving employment models. :-

Hiring employees for fixed term employment 

Employers can hire employees for a fixed duration but with the same wages, benefits and social security that the permanent workers are entitled to receive. This arrangement allows IT firms to recruit skilled professionals for certain time bound projects, pilot programs or seasonal global assignments without the need for long-term contracts. It offers employers workforce agility and cost optimization and aligns employment cycles with project timelines while ensuring access to experienced talent.

Flexibility in Work, including Work from Home

The provisions are outlined in the Codes. They enable governments to establish rules for flexible work, home-based work or remote employment in certain sectors. These regulations provide a legal framework for hybrid and remote work models, which became a standard following the covid-19 pandemic. They assist IT employers in formalizing their flexible work arrangements, managing liability and working hour records and ensuring compliance even when employees work on a remote basis. This is critical for ensuring business continuity and global competitiveness.

Flexible Working Hours and Women Employment

The Occupational Safety, Health and Working Conditions Code 2020 empowers Central Government as well as State Governments so they can come up with regulations that allow women to work in all types of establishments, including during night hours as long as all the adequate safety measures, transportation and rest facilities in place for them. Companies within the IT and ITeS sectors often operate across global time zones and require 24/7 support and night shifts. This provision legitimizes night work for women with established compliance norms and helps organizations to maintain gender diversity as well as fulfill international service obligations. 

Ease of Doing Business and Simpler Compliance

The new labour codes are making compliance simpler and promoting ease of doing business by doing the following. :-

Replacing Multiple Registrations

The new codes introduce a single registration system, a unified return filing process and a single license that remains valid all across India. This replaces the need for multiple registrations that are necessary under different laws of the country. For IT companies that are operating in various states or campuses, this approach reduces compliance duplication, lowers administrative costs and minimizes bureaucratic delays to a great extent. The introduction of a single digital interface for all registrations (including factories, shops, EPFO and ESIC) blends quite well with the digitized HR and compliance systems of the Information Technology sector.

 Improvement Notices’ Introduction and Offences’ Decriminalization

The Codes enable monetary penalties instead of criminal prosecution for minor procedural violations. Employers get a period of 30 days to rectify non-compliance before being subject to penalties. These provisions encourage a cooperative compliance atmosphere. IT companies, which often have to deal with quite complex employment structures (like onsite offshore arrangements and global mobility), benefit from reduced fears of criminal charges due to inadvertent delays or as a result of technical lapses. This enhances the overall ease of doing business for such companies.

Encouragement for Self Certification and Digitization

The new codes encourage self certification systems, digital record-keeping, e-filing of returns and web based inspections. The provisions for digitization make HR audits quite streamlined and also enable paper compliance. IT companies already focus on technology. Through integration of these systems into existing human resource management systems or enterprise resource planning platforms, such companies can reduce man made errors and hassles that come with inspection. Due to self certification, a compliance regime based on trust is built and the inspector raj is reduced. This allows the management to focus on growing the business.

Health and Safety at Workplace

Here is how the codes ensure health and safety at the workplace.

Health Check Ups Annually and Safety Standards for Workplace

As per OSH and WC Code 2020, every employee is entitled to free health check-ups in a year. Employers must create safe, healthy and comfortable workplaces. These measures help to protect from occupational health issues such as eye strain, back pain and stress related ailments that are quite common among those having desk based jobs. Additionally, regular health screenings as well as safety audits contribute to overall well being and increased productivity.

Commuting Accidents’ Inclusion under Employees Compensation

According to this provision, If an individual meets with an accident while traveling to or from work, it is treated as arising out of and in the course of employment. This allows tech professionals, who commute long distances or visit client sites, to receive appropriate insurance benefits and compensation.

Career & Skill Growth

The codes help in development in skills and career.

National Skill Qualification Framework (NSQF)

This provision under the Code on Wages allows the fixation of wage on the basis of skill levels that are NSQF-certified. It will recognize the professional skills in a formal manner and reward certification as well as skill advancement with higher pay and career progression. What’s more, it will encourage continuous upskilling when it comes to the new technologies.

Dispute Resolution and Grievance Redressal Mechanism

Here is how the codes ensure dispute resolution and grievance redressal.

Committees for Grievance Redressal and Dispute Resolution

This is a provision under the Industrial Relations Code. This has been put in place in order to create a well structured time bound system. Such a system can effectively address issues arising at the workplace like harassment, discrimination or wage disputes.

Conclusion

With the implementation of new labour codes, the labour framework has made a transformative shift. These codes offer flexibility, protection and modernization – all in a balanced manner. For the IT sector in particular, these reforms strengthen not just employee welfare but also give a boost to the employer capabilities. They make compliance much simpler and formalize the diverse work arrangements. Additionally, they expand society security benefits and make safety a priority at offices, especially for women.

Reference: PIB